After 7 Years of Job Growth, Room for More, or Danger Ahead?

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A United Parcel Service driver in Seattle looking for a package inside his truck. E-commerce is fueling jobs at warehouses and delivery companies, though employment in the conventional retail sector also picked up in November.CreditCreditDavid Ryder/Reuters

The economy’s vital signs are stronger than they have been in years. Companies are posting jobs faster than they can find workers to fill them. Incomes are rising. The stock market sets records seemingly every month.

The latest evidence of the revival came Friday, when the Labor Department reported that American employers added 228,000 jobs in November. The unemployment rate held steady at 4.1 percent, the lowest since 2000. Job growth has slowed since its peak in 2014 but remains remarkably steady: For the first time on record, employers have added jobs every month for more than seven years — 86 months, to be precise.

“It’s a really, really strong economy,” said Tom Gimbel, chief executive of LaSalle Network, a staffing firm in Chicago. “Companies really want to take advantage of the economy, so they want to hire and get while the getting’s good.”

That strength could also pose challenges, particularly in light of the $1.5 trillion tax cut that Congress could pass as early as this month. Economists expect the tax bill to provide at least a modest lift to the economy — but they are not sure that’s a good idea.

With unemployment so low and the economy fundamentally healthy, a tax cut could lead the economy to grow too quickly, pushing up inflation and forcing the Federal Reserve to raise interest rates faster than planned.

“It’s a very poorly timed fiscal stimulus,” said Joseph Song, an economist at Bank of America. “It kind of raises the risk of a boom-bust cycle.”

For now, however, the figures present a political opportunity for President Trump, who ran for office on a promise to revive the American economy.

Economists almost universally say Mr. Trump has had little to do with the rebound, which began long before he was elected and has not accelerated meaningfully since he took office. But with unemployment low and wages beginning to creep upward, voters may be more inclined to give credit.

Sarah Huckabee Sanders, the White House press secretary, said on Friday that the jobs report was evidence that “President Trump’s bold economic vision continues to pay off.”

Wherever the credit lies, workers are benefiting from an economy that is delivering broad-based gains in income and employment for the first time in at least a decade. Groups that were left behind in the early stages of the economic recovery, such as African-Americans and people without a college degree, have seen their unemployment rates drop sharply in recent years.

And although wage growth remains disappointing, household income — which reflects not only hourly pay rates but also how many people have jobs and how many hours they are working — has shown strong gains, particularly for poorer households.

Companies in nearly every sector are reveling in the best opportunities they have seen in years. Improving global growth is giving a lift to manufacturers, which have added jobs for four straight months. Rising incomes and strong consumer confidence helped retailers, whose payrolls grew at the fastest pace since January despite the shadow of rising online sales. Even the fall hurricanes, which led to a short-lived slowdown in hiring in September, are now helping employment as Texas and Florida rebuild. The construction sector added 24,000 jobs in November.

So as far as the business climate, “maybe it’s not quite the best ever, but it’s pretty close to the best ever,” said Mike Bolen, chief executive of McCarthy Building Companies, a commercial construction company with offices across the country.

“Typically, we’ll have one region that’s really hot and one region that’s really slow, and right now, all five regions are just cooking,” he added. “Everything’s busy.”

Business could get even busier soon. The Republican tax plan aims to encourage business investment by cutting corporate taxes, which could increase demand for the big projects — hospitals, airports, office building — that make up a big part of McCarthy’s business. In fact, Mr. Bolen said, many clients are already making plans on the assumption that the legislation will pass.

“A lot of people are making decisions this year assuming that it’s going to happen,” Mr. Bolen said. “If it doesn’t happen, I think you’ll see some people pull back.”

The challenge for McCarthy, as for other builders, is finding the workers for their projects. A couple of years ago, Mr. Bolen said, job seekers would line up outside the gates of construction sites, hoping for a chance to work. Today, McCarthy is having so much trouble finding qualified workers that it is building a 10-acre training center outside of Houston and hiring staff members to teach construction skills.

“It’s a really big deal now, probably a bigger deal than I’ve ever seen it, and I don’t see it getting better,” Mr. Bolen said. “We are spending a lot of money and effort trying to train up the unskilled portion of our work force.”

The question vexing many economists is why, if labor is as scarce as Mr. Bolen and other executives claim, workers are not seeing bigger increases in their paychecks. McCarthy has raised pay, especially for people with specialized skills. But over all, wage growth remains restrained. Average hourly earnings were up 2.5 percent in November from a year earlier, only a bit faster than the rate of inflation.

“It’s still just creeping higher,” said Brett Ryan, an economist at Deutsche Bank in New York. “Wage growth is just not taking off the way we’ve seen in the past.”

That picture could change. Other measures of earnings, for example, show faster growth. And according to an analysis by Ian Shepherdson, chief economist for the forecasting firm Pantheon Macroeconomics, wages are rising faster in regions where the unemployment rate is lowest. That suggests that pay growth could accelerate if the unemployment rate continues to fall in 2018 as Mr. Shepherdson expects.

Companies are feeling more pressure to raise pay. For the first time in six years, chief executives surveyed by Business Roundtable, a coalition of big corporations, reported that labor expenses were their biggest cost pressure in the fourth quarter.

Catherine Barrera, chief economist of the online job site ZipRecruiter, said wages would pick up when workers gained the confidence in the economy to demand raises — and to change jobs if they do not get them. There are signs that could be happening. Nearly 9.5 million workers quit their jobs voluntarily in the third quarter, the most since 2001.

“If people are feeling really confident and comfortable with the labor market, they’re going to be more likely to seek that next opportunity,” Ms. Barrera said. “When we see that type of confidence, that’s when wages will grow.”

Rising pay would be good news for workers. But it could cause concern at the Federal Reserve, where policymakers have been gradually raising rates and paring the Fed’s bond holdings in a bid to keep inflation in check.

The Fed is all but certain to raise interest rates at its meeting next week, and has signaled plans to do so three times next year as well. But if inflation starts to pick up, the Fed could be forced to act more quickly than it wants, with unpredictable effects on financial markets and the economy.

“You could be looking at a combination in the summer of stronger growth, unemployment at 3.5 percent and still falling, and wage growth picking up as well,” Mr. Shepherdson said. “That requires a fairly substantial adjustment to markets.”